In April 2023, I wrote a SeekingAlpha article titled: Pliant Therapeutics: Bad Risk Reward, Buy Vicore Pharma Instead. In the article, I introduce Vicore Pharma (STO:VICO) and compare it to the US-listed 1.0 billion USD company Pliant Therapeutics (NASDAQ:PLRX). The article’s point was that the US-listed Pliant was 12 times more expensive than Sweden-listed Vicore while having materially worse results. In fact, Vicore has the best results of any company in Idiopathic Pulmonary Fibrosis [IPF]. In the article, I also provided a valuation of Vicore and compared it to the valuation of Pliant.
In early September, Pareto Securities published a report on Vicore and the analyst Dan Akschuti, one of the best pharma analysts in Scandinavia. Did an interview where he summarized its findings. Dan is very bullish on Vicore. In this article, I review the progress Pliant and Vicore have achieved.
Pliant Therapeutics progress
In May, Pliant released its 24-week phase 2a data, which showed a negative change in lung capacity. Pliant positioned its results as positive. The report was surprising:
- Pliant reported only 320mg group results. It did not present the previously presented 40 mg, 80mg, and 160mg groups. In my first article, I pointed to a quote from Pliant CEO from 2022, Life Science Leader magazine: “Be strategic when disclosing data.” It was a surprising quote from a pharma CEO. This readout indicated that Pliant may still be adhering to the strategy.
- The results of the 320mg after four weeks were in line with placebo.
In summary, the report indicated that its drug only works for the first four weeks. After that, the patient’s lung capacity declined in line with placebo. Pareto’s view was that Pliant is unlikely to complete the study.
In my first article, I recommended short, Pliant through options. That strategy has been working. At the time of my SA article publication, Pliant share price was USD30.23. The last closing price of Pliant was USD16.46, down 45% from the publication.
Will Pliant join the failed IPF drug list?
Several trials have been discontinued this year in IPF. Roche (OTCQX:RHHBY) terminated all Promeditor programs, FibroGen (FGEN) also announced its phase 3 trial in IPF failed, and Galecto (GLTO) also filed with their IPF drug. In the next 12 months, we should see whether Plaint will also join the long list of failed drugs.
Vicore’s drug remains the only one to demonstrate that a high proportion of patients achieve stabilization and improvements in lung capacity.
Why is Vicore so Unique?
Vicore is one of the companies searching for the cure of now deadly Idiopathic Pulmonary Fibrosis (IPF). There is no cure for IPF now. There are medications that can slow down the disease. Such medications were sold for material valuations.
In May, Vicore published the latest interim data of the 36-week phase 2a trial. The results were unprecedented. Up to now, no other company in this field is showing such results. Further, Vicore is the only drug that activates a healing mechanism of the lung. It is the first drug that has the potential to make an IPF a curable disease. The results were almost too good to be true.
Pareto Securities, in their research, states:
“We found no confounding factors, the data is as robust as it getsfor a phase 2a trial”
There are drugs on the market, but they only slow the disease. Vicore’s ability to cure the IPF would be a significant competitive advantage. Multiple companies are trying to develop new IPF drugs. Until now, Vicore is leading in the race to cure the IPF.
Strong backing for Vicore by US specialists investors
In June 2023, Vicore raised 500 million SEK (about USD50 million) from top US specialist investors such as Orbimed and Suvrett, while top Swiss healthcare fund HBM substantially increased its position. Backing from the most reputable investors in the field is a strong confirmation of the investment case.
Price Target for Vicore
In my article, I argued that the Vicore valuation should be multiple times higher than it is today. I projected at least 100% in the next 12 months.
Pareto Analysts as highlighted in the interview has three price targets:
- The 12-month price target of 97 SEK vs. the current share price of 15 SEK.
- The “fair value” of the stock is estimated at 184 SEK, assuming a 55% likelihood of approval (increased by 9% in the report).
- The “total upside” is assessed as 372 SEK per share, estimated for 2027. The total upside represents 25x the current share price.
That “total upside” valuation above is still just ~60% of what Roche paid for InterMune (USD 8.3 bn). The transaction took place after the approval for Europe and Canada, the US approval was pending.
Vicore is making progress for the share price to follow the fundamentals.
Vicore has made several steps that should help investors value Vicore based on its fundamental value:
- The company is now fully funded till mid-2024
- The complete results of the 2a study will be published in 1Q24
- The 2b study should start this year. The 2a study should allow the company to apply for FDA registration early.
- Vicore established a US subsidiary.
- Boston-based new CEO took over at the start of September.
- New European patents were granted for an improved formulation that increases patent protection by an additional seven years to 2041.
Risk factors
We have highlighted the risk factors for Pliant above. The risk of discontinuation is high. At the same time, if the study results would improve, there is a high upside risk potential.
Vicore investors should be aware of two major risks: failure to sustain unprecedented study results and inability to obtain financing to continue operations. Pareto assesses the likelihood of FDA approval at 55%, increased by 9% in the latest report. It is important to mention – Vicore is the only drug that activates a healing mechanism of the lung. It would be enough for Vicore to slow the disease to get a multi-billion dollar valuation. The risk of obtaining financing is related to Vicore’s ability to deliver strong study results. From an investor’s point of view, the presence of the top specialist investors is a strong vote of confidence on those risks.
Catalysts that should drive the share price
For Pliant, the next readout might be decisive.
For Vicore, the most significant catalysts are the full results of the 2a study and the start of the 2b study, both due in 1Q24.
Up to now, Vicore has focused on its Scandinavian investor base. The newly appointed Boston-based CEO will most likely try to bring Vicore closer to the US investors. As US-listed peers have multiple times higher valuations, US investor attention should positively impact the share price.
Conclusion
We continue to be short Pliant through options. We are concerned that the downside spiral may continue. At the same time, there is a material upside risk if next readout would turn out better than expected.
If Vicore was listed in the US, it would be a multi-billion company now as is Pliant, despite having much worse drug study results than Vicore. That creates the opportunity – Vicore is a multi-billion dollar company in the making and still off the radar screens of many investors. The top US pharma-focused funds have already invested. In the next round, more generalist investors are likely to follow so that the company re-rates to its fundamentals.
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